Managing downsizing in the public service : Lessons learned from the Program Review of the Government of Canada

Managing downsizing in the public service :

Lessons learned from

the Program Review of the Government of Canada

Roger Scott-Douglas

5ème réunion régionale du

Groupe de Travail sur la fonction publique et de l’intégrité

Rabat, Maroc

Overview of the

• Program Review : A tale by the numbers

• A portfolio of early departure programs

• What worked well, what did not

• Consequences for workforce planning

• Consequences for maintaining HR capacity

• Impact on the labour force and the general economy

• Conclusions

3

Fiscal profile (1993-94)

– $38 billion (32.7 % of budgetary revenues)

• Total program spending :

– $120 billion (16.6% of GDP) • Canada loses its AAA rating (1995)

• Number of employees in the core federal public service:

– Total: 225, 000

– Indeterminate: 195, 000 – Term and casual: 30,000 • Profile:

– Number of executives: 3,300 (1,4%) – Average age: 41

– Women: 47.8% (21% of executives) – Average salary : approximately

$45,000

• Overall cost of compensation:

– $20 billion (16,6 % of total program spending)

• Key restraint and other workforce measure over the last decade : 10

HR profile(1994-95)

• Annual Surplus:

– $3.5 billion • Debt :

– $583.2 (68.1% of GDP) • Cost of servicing debt :

– $41.5 billion (28.1% of budgetary revenues) • Total program spending :

– $106 billion (12.4% of GDP) • No strikes or major job actions

• Government re-elected with a majority (1997)

Fiscal profile (1997-98)

Program Review…

a tale by numbers (2/2)

HR profile (1998-99)

• Number of employees in the core federal public service:

– Total: 186,000 (-17%) – Indeterminate: 156, 000 – Term and casual: 30,000 • Profile of those who departed:

– More men than women

– More Anglophones than Francophones – More younger than older

– More regional than National Capital – Most affected occupations groups:

engineering and scientific support (20%); educators (31%); general services (34%); general labour (29%) secretarial (29%); executives (16%)

• Overall cost of compensation:

– $15 billion (14 % of program spending) • Cost of departure programs (over 3 years):

– Total $4.2 billion (total salary savings: $8.4 billion)

5

A portfolio of …

early departure

programs

Early

Departure(14000)

Early Retirement

(12000)

Privatisation (8000)

Civilian Reduction

(5700)

Workforce

Adjustment (2700)

Terminated (1000)

What made it a success?

1. Targetted but flexible programs, which evolved in light of new information

2. Strong support at highest levels of the government and public service

3. Detailed and practical information provided to managers and to employees

4. Effective management-union

committees to manage the workforce reductions

5. Management framework to guide the use of early departure programs and to assist with the cost/benefit analysis

1. Highly-trained technical staff were encouraged to leave rather than

transferred to other areas where they were needed

2. The early departure package was more generous than was needed to encourage staff to leave

3. Too many young professionals left, compounding the systemic problem of the aging of the workforce

4. Not enough attention was paid to the stress of being a “survivor”

5. Not enough monitoring was done of the increased use of contractual support in the aftermath of the downsizing

What were our mistakes ?

7

Consequences for …

• The Paradox of Planning:

– Workforce planning must precede the program reforms; yet workforce requirements can be known only after the reforms are implemented

• Reliability of assumptions diminishes significantly during periods

of reform:

– Future plans are based primarily on past performance and behaviour, which often change significantly and unpredictably in periods of major reform

• Synchronizing timeframes is a major challenge:

– Most major HR downsizing (and upsizing) requires between 18 and 24 months; most major program reforms require between 12 and 18 months

Consequences for …

• The merciless laws of supply and demand:

– The more specialized and technical the staff, the more likely they are to take advantage of early departure programs (and the harder they are to replace)

• Distribution of capacity:

– Often the biggest challenge is re-distributing capacity from where it is under utilized to where it is in short supply after the reforms

• Even effective early departure programs are blunt instruments:

– It is very difficult to target programs sufficiently to ensure critical capacity is maintained where it is needed most during and after the reforms; other HR objectives (representativeness; gender equity; bilingualism; etc) are even more difficult to accommodate

9

Impact on the labour

force …

• The downsizing of the public service followed a period of

strong economic growth

– GDP grew by 4.25 % in 1994,

– 433,000 new jobs had been created, resulting in a 1.7 % drop in unemployment rate, and

– The inflation rate was low, at 1.5 %

• In this context, the overall effect on the labour force and

economy was generally positive:

– An influx of highly-skilled and well-trained workers

– Helped reduce pressures for wage inflation in “hot” labour market – Relatively-even regional distribution of affected government workers

• In the period following the downsizing, the federal

government itself become an actor in the labour market

– In 1995 term and causal employees made up 11% of the public service; by 2000 the number had risen to 18%

Conclusions

•

Although natural attrition rates will help with “downsizing”, they are

not sufficient on their own

– 17,000 left the federal public service without a “package (1995-1998)

•

It is important to remember that staff are both the “agents” of the

reform and the “object” of the reform:

– Reform fatigue hits quicker and harder than expected – Middle-managers shoulder the heaviest burden

•

There is an extraordinary tendency to “revert to form” after a major

reform:

– By 2003, the size of the public service was essentially the same as it was in 1995 (when military personnel are excluded)

– For the combined core public service and separate employer domains, total salaries:

• fell from $9.1 billion in 1990–91 to

• $8.2 billion in 1997–98, and then rose by 50% to • around $12.4 billion in 2002–03.

– However, when measured against the Canadian population, the share of Federal government employment was significantly below pre-Program Review levels (even when military personnel are included)

11

Key sources

• Employment Statistics for the Federal Public Service(1996-97) http://dsp-psd.pwgsc.gc.ca/Collection/BT22-51-1997E.pdf

• Rapport du vérificateur général du Canada, 1998 avril. Chapitre 1 — Les réductions des dépenses et des effectifs au sein de la fonction publique

http://www.oag-bvg.gc.ca/internet/Francais/parl_oag_199804_01_f_9307.html

• Report of the Auditor General of Canada, 1998 April. Chapter 1—Expenditure and Work Force Reductions in the Public Service

http://www.oag-bvg.gc.ca/internet/English/parl_oag_199804_01_e_9307.html

• Rapport du vérificateur général du Canada. 1998 avril. Chapitre 2 — Les

réductions des dépenses et des effectifs dans certains ministères http://www.oag-bvg.gc.ca/internet/Francais/parl_oag_199804_02_f_9308.html

• Report of the Auditor General of Canada .1998 April .Chapter 2—Expenditure and Work Force Reductions in Selected Departments

http://www.oag-bvg.gc.ca/internet/English/parl_oag_199804_02_e_9308.html

• Work Force Adjustment: A comparison of the United Kingdom, New Zealand and Australia, February 1997, Public Service Commission of Canada

• Réduction des effectifs Comparaison du Royaume-Uni, de la Nouvelle-Zélande et de l’Australie, février 1997 Commission de la fonction publique du Canada